Fiat Chrysler to build Jeep in revived Detroit plant

The entrance to Fiat Chrysler Automobiles' Mack Avenue Engine plant in Detroit is seen on Thursday. FCA plans to convert the idle Mack Avenue Engine II, idle since 2012, as an assembly plant to build a new three-row Jeep Grand Cherokee for the model year 2021.(Photo: John T. Greilick, Detroit News)

Detroit — Fiat Chrysler Automobiles NV plans to convert an idled engine plant in the city into an assembly plant as part of the automaker's plans to add a new three-row Jeep SUV to its lineup, The Detroit News has learned.

The Auburn Hills-based automaker plans to revive Mack Avenue Engine II, which has been idled since 2012, as an assembly plant building a new three-row Jeep Grand Cherokee for model year 2021, multiple sources familiar with the plans told The News. The move could add as many as 400 new auto jobs in the city.

FCA plans to convert the idle Mack Avenue Engine II plant in Detroit, idle since 2012, as an assembly plant to build a new three-row Jeep Grand Cherokee for the model year 2021. The move could add 100-400 jobs in Detroit.(Photo: John T. Greilick, Detroit News)

When Mack II starts production of the three-row Grand Cherokee, FCA would begin retooling Jefferson North Assembly Plant — directly across the street from the Mack Avenue Engine Complex — to make way for the next generation of the two- and three-row Grand Cherokee. A public announcement is tentatively scheduled for the end of next week.

An FCA spokeswoman and the office of Mayor Mike Duggan declined comment.

“FCA is essentially out of capacity,” said Jeff Schuster, an analyst with LMC Automotive in Troy. “They’re kind of running up against being against full capacity. This is a very different situation than what GM is dealing with.”

Even as Fiat Chrysler officials mull decisions to prepare for a future expected to include expensive electric and autonomous vehicles, the automaker needs to invest in a new assembly line to build the profitable SUVs that will raise cash to fund that future. Fiat Chrysler’s plant capacity utilization in November hit 92 percent in North America.

The capacity crunch is not an accident. In 2016, FCA's late CEO, Sergio Marchionne, shocked the industry when he confirmed FCA would abandon car production in the United States and retool the plants to build profit-rich Ram pickups and Jeep SUVs. The plans to convert Mack II to build the Grand Cherokee are the latest move in that strategic realignment.

Construction on Mack II, internally dubbed "Plant X," likely would begin next year, as Detroit's automakers prepare to begin national contract talks with the UAW. To convert the old engine plant to a full assembly line, sources said, the automaker would need to add at least a body and paint shop.

Reviving the idled half of the Mack engine plant as an assembly operation would improve a worsening capacity problem for Fiat Chrysler. With strong demand for its Jeep and Ram products, the automaker has shuffled products from plant to plant in recent years while it retools for new vehicles — an attempt to avoid the significant financial hit of idling production of its most profitable vehicles.

Fiat Chrysler's North American assembly plants are currently running at 92 percent capacity, according to data compiled by LMC Automotive for The Detroit News. By comparison, GM and Ford Motor Co. were operating at 72 percent and 81 percent through November, respectively.

But FCA's Jefferson North plant, on the west side of Conner between Mack and Jefferson, is operating at 130 percent capacity. That means the automaker is running extra shifts to meet demand for the Jeep Grand Cherokees, Jeep Grand Cherokee SRTs and Dodge Durangos made there.

Only two of Fiat Chrysler's U.S. assembly plants are operating at below 80 percent capacity in 2018: the Toledo Supplier Park and Warren Truck Plant. Currently building only the Ram 1500 work truck, the Warren plant is operating at just 46 percent of capacity.

The new production line on Mack Avenue would also add a valuable new three-row product to Fiat Chrysler’s hot-selling Jeep lineup. The revamped line is expected to add hundreds of new jobs on Detroit’s east side and to bolster the city's tax base.

FCA's plans for its U.S. plants are a stark contrast to GM's. The Detroit automaker plans to idle five plants in North America next year, imperiling the jobs of 6,300 line workers in the region as it slashes some 8,000 white-collar jobs in a restructuring plan designed to save the Detroit automaker $6 billion by 2020.

Among the affected GM plants is Detroit-Hamtramck Assembly, staffed by nearly 1,350 union workers and one of only two vehicle assembly plants left in Detroit. Should GM's Detroit plant close as part of 2019 contract talks with the UAW, Fiat Chrysler’s Jefferson North Assembly Plant stood to become to final auto assembly plant in Detroit — until the Mack II project emerged.

Jefferson North, the last remaining automotive assembly plant located entirely inside Detroit's borders, completed construction in 1991 and produced its first Grand Cherokee in January 1992. GM opened Detroit-Hamtramck Assembly in 1985, after the city used eminent domain powers to seize a predominantly Polish neighborhood for the auto plant.